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AMC strengthens balance sheet with successful $325.5m stock sale

EditorPollock Mondal
Published 15/09/2023, 10:36 am
Updated 15/09/2023, 10:36 am
© Reuters

In a move to fortify its financial position, AMC Entertainment (NYSE:AMC) Holdings, the movie theater chain, successfully sold $325.5 million of its stock on Thursday, resulting in a significant boost to its cash reserves and addressing liquidity concerns. The company's stock value also saw an uptick, rising by 5.9% to $8.74.

The stock sale is part of AMC's strategy to mitigate financial challenges that have plagued the company due to pandemic-related shutdowns in recent years. The decision to raise capital through a stock sale initially sparked apprehension among shareholders due to fears of share dilution.

To mitigate these concerns, AMC introduced approximately 517 million preferred equity units, also known as APEs, on the New York Stock Exchange in August 2022. In August 2023, the company executed a 1-for-10 reverse stock split, effectively reducing the number of outstanding shares and converting each APE unit into one post-split AMC share.

The at-the-market (ATM) equity offering was finalized on Wednesday, with the sale of 40 million shares at an average price of about $8.14 each generating approximately $325.5 million in new equity capital.

B. Riley analyst Eric Wold views this development positively for AMC. He suggests that the proceeds from the ATM offering not only provide a near-term liquidity safety net amid potential risks posed by ongoing Hollywood strikes affecting the 2024 film slate but also offer an opportunity for AMC to trim down principal balances for higher interest rate debt due for maturity in 2026 and beyond.

Wold maintains a neutral rating on AMC's stock with a $45 price target. He believes that AMC should continue with equity sales to offset debt during the uncertain period of the Hollywood strike and its potential impact on the movie industry. Once the strikes conclude, Wold suggests that AMC could utilize the cash to acquire new movie theaters and diversify its growth strategies.

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